Unscrupulous fuel retailers could take advantage of lower cost of kerosene to boost volumes.

A Kerosene pump attendant fills a container in Nyeri. [John Gathua, Standard]

In February last year, the retail price of kerosene was at par with that of diesel. But as fuel prices dipped in March due to reduced demand on account of the Covid-19 pandemic, kerosene seems to have dropped by a bigger margin.

When prices started to recover in May, kerosene stayed lower than diesel, having maintained a Sh10 lead when the products are compared throughout last year.

The difference in pricing of kerosene and diesel is now raising fears that fuel adulteration could make a comeback after it was brought down to negligible levels with tax measures that put the prices at par.

Today, petrol is Sh25 more expensive than kerosene - a poor man’s fuel that is used for lighting and cooking.

High kerosene prices had dealt a blow to crooks who would add the fuel to diesel, and even super petrol.

This would increase the volumes of diesel that was then sold to unsuspecting motorists who would pay a heavier price when their vehicle engines gave in. 

According to the Energy and Petroleum Regulatory Authority (Epra), the illegal practice was eliminated, with few reported cases of adulteration in 2019 and 2020.

This, however, came at a cost as the market segment that previously relied on kerosene for lighting and cooking had to grapple with a steep increase in price, without affordable alternatives available to them. 

The price was low for most of last year, retailing at much lower than both diesel and super petrol.

Prices of diesel and petrol also generally remained low in the course of 2020, giving little incentives to adulterators. 

But a week ago, when Epra published its latest monthly price capping guide, the differences between the retail prices of the fuels grew substantially. 

There is a Sh10 difference between the price of kerosene and diesel while it is reasonably higher with petrol at Sh25.

Stephen Mutoro, the Consumers Federation of Kenya secretary general said the latest hike would make it attractive to unscrupulous traders who have in the past used kerosene to increase volumes of diesel and petrol. 

“What happens with adulteration? It will go up. If you have super petrol at Sh122 and kerosene at Sh97, for the unscrupulous businesses that thrive in the illegal trade, it makes sense why they would buy kerosene to mix with petrol or diesel,” he said

“In this case, you end up with unintended consequences of certain decisions where people will be forced into the black market where only cartels and middlemen gain.”

Other than the price of kerosene making slow recovery after last year’s slump in oil prices, diesel and petrol were subjected to high petroleum development levy, which was in July increased to Sh5.40 from 40 cents. 

The Petroleum ministry conceded that there is a high risk that adulterators could come back, considering the difference in the retail price of kerosene and the other petroleum products.

“Kerosene is currently cheaper than diesel by Sh10. We have been having various discussions and people have asked why not peg kerosene prices to diesel. We have to balance a lot of things,” said Principal Secretary Andrew Kamau. 

“We have to balance between fighting adulteration and giving access to fuel for the common mwananchi. The risk is that the people who are doing this do not care about Kenyans. They want to make money at any cost.

“We can continue to add taxes to kerosene but as Kenyans, we could also decide… have the citizens agree to expose people adulterating by taking them to the authorities.” 

Among the taxes that led to the price of kerosene matching that of diesel are an anti-adulteration levy of Sh18 per litre of kerosene that was introduced in 2018.

In the months leading to its introduction, the government also increased excise duty levied on kerosene by Sh3.10 per litre, pushing the total excise duty to Sh10.31 from the earlier Sh7.21, also aimed at reducing adulteration. 

The taxes came after a study of the Tanzanian market that has succeeded in taming fuel adulteration primarily through increasing the cost of kerosene.  

The increase in kerosene prices coincided with a ban on logging to save the diminishing forest cover, which resulted in the cost of charcoal going up sharply.

Though itself a dirty fuel, charcoal has traditionally been available to Kenyans affordably.

According to data by the Kenya National Bureau of Statistics, the cost of a four-kilogramme tin of charcoal was about Sh150 throughout 2019, compared to earlier prices of Sh80 and sometimes lower.

The price have, however, eased to levels seen before the ban on logging. 

Implementation of the Mwananchi Gas Project, which would have offered low-income households access to subsidised cooking gas, also ran into hurdles.